In order to mitigate the stress caused by the Covid-19 pandemic on several sectors across the country, the government has announced an Emergency Credit Line Guarantee Scheme, which incorporates ECLGS 1.0, ECLGS 2.0 and ECLGS 3.0.
Moneycontrol explains the Emergency Credit Line Guarantee Scheme (ECLGS 1.0, ECLGS 2.0 and ECLGS 3.0), the sectors covered by it, the scheme’s duration, and other aspects.
What is the purpose of the Emergency Credit Line Guarantee Scheme?
The ECLGS aims to provide 100 percent guaranteed coverage to the banks, non-banking financial institutions (NBFCs) and other lending institutions in order to enable them to extend emergency credit to business entities that have suffered due to the Covid-19 pandemic and are struggling to meet their working capital requirements.
What is ECLGS 1.0?
The ECLGS was launched as part of the Rs 20 lakh crore Covid-19 relief package called the Aatmanirbhar Bharat Abhiyan. The scheme aimed to provide Rs 3 lakh crore worth of collateral-free, government-guaranteed loans to micro, small and medium enterprises (MSMEs) across India to mitigate the distress caused by the coronavirus-induced lockdown
ECLGS 1.0 had a 1-year moratorium period and a 4-year repayment period.
Under the scheme, borrowers could avail of additional credit of up to 20 percent of their overall outstanding credit as on February 29, 2020. The scheme was envisaged to provide collateral-free and fully guaranteed credit to entities that had outstanding credit of up to Rs 25 crore as of February 29, 2020, with an annual turnover cap of Rs 100 crore for the financial year 2019-2020.
The scheme was valid till October 2020 but was later extended till November end.
What is ECLGS 2.0?
In November 2020, Finance Minister Nirmala Sitharaman announced the launch of ECLGS 2.0 by extending the Rs 3 lakh crore scheme to support 26 stressed sectors identified by the Kamath Committee and the healthcare sector. The scheme was valid till March 31, 2021.
These sectors included power, construction, iron and steel manufacturing, roads, real estate, textiles, chemicals, consumer durables, non-ferrous metals, pharma manufacturing, logistics, gems and jewellery, cement, auto components, hotels-restaurants-tourism, mining, plastic product manufacturing, automobile manufacturing, auto dealerships, aviation, sugar, ports and port services, shipping, building materials, and corporate retail outlets.
The tenor of the credit under ECLGS 2.0 was five years, including a one-year moratorium. Companies with dues of Rs 50-500 crore as on February 29, 2020 were eligible, as announced by Sitharaman.
The ceiling for outstanding credit was increased from Rs 25 crore to Rs 50 crore under ECLGS 2.0.
The Finance Minister also announced that the ECLGS 1.0 and ECLGS 2.0 would be valid till March 31, 2020.
What is ECLGS 3.0 ?
In order to support the Hospitality, Travel and Tourism, Leisure, and Sporting sectors, which are among those most affected by the Covid-19 pandemic, the government on March 31 widened the scope of the Rs 3 lakh crore scheme by announcing ECLGS 3.0.
Under ECLGS 3.0, business enterprises in the hospitality, travel and tourism, leisure and sporting sectors would be able to avail credit under the scheme.
It also extended ECLGS 1.0 and ECLGS 2.0 by another 3 months, along with ECLGS 3.0, to June 30, 2021.
ECLGS 3.0 involves the extension of credit of up to 40 percent of the total credit outstanding across all lending institutions as of February 29, 2020, from 20 percent earlier.
The tenor of loans granted under ECLGS 3.0 is six years, including a moratorium period of two years. The scheme will only consider loans less than 60 days overdue as on February 29, 2020, with total credit outstanding not exceeding Rs 500 crore.